2004 (8) TMI 50 - HC - Income Tax

Levy of penalty under section 272A(2)(g) late issue of tax deduction certificates - assessee had deducted tax at source out of payments made to eight contractors. Under the provisions of section 203 read with rule 31 of the Income-tax Rules 1962, it was required to issue tax deduction certificate in Form No. 16A to the said parties within the prescribed time. However, the said forms were issued late - Assessing Officer required the assessee to explain as to why penalty under section 272A(2)(g) of the Act be not levied on account of the above mentioned default - The tax deducted at source had been paid in time and the necessary return in respect of the same was duly filed in time with the Income-tax Department. No loss of revenue has occurred on account of late issue of tax deduction certificates. None of the contractors has raised any grievance on account of late supply of the certificate. Keeping in view these facts and especially that the default is merely technical or venial in nature, we are satisfied that it is not a fit case for the levy of penalty.

Summary

Issues:
- Appeal under section 260A of the Income-tax Act, 1961 against the order of the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh.
- Levy of penalty under section 272A(2)(g) of the Act for delay in issuing tax deduction certificates.

Analysis:
The judgment delivered by the High Court of Punjab and Haryana involved an appeal under section 260A of the Income-tax Act, 1961, against the order of the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, dated July 22, 2003. The Tribunal had allowed the Revenue's appeals against the order of the Commissioner of Income-tax (Appeals) for the financial years 1995-96 and 1996-97, upholding the levy of penalty under section 272A(2)(g) of the Act. The court addressed the issue of maintainability of the appeal against the order of the Tribunal in two appeals for different assessment years and proceeded to decide the appeal for the assessment year 1995-96.

The case revolved around the delay in issuing tax deduction certificates to contractors by the assessee. The Assessing Officer required the assessee to explain why penalty under section 272A(2)(g) should not be levied for the default. The assessee provided reasons for the delay, attributing it to the organizational structure and workload at HMT, Pinjore, a branch of HMT Limited. The assessee argued that there was no mala fide intention in the delay, no loss of revenue, and no grievances raised by employees or contractors due to the delay.

The Commissioner of Income-tax (Appeals) accepted the assessee's explanation, noting that the delay affected only eight cases out of more than 5000 persons who required tax deduction certificates. The Commissioner canceled the penalty, emphasizing the absence of mala fide intention or revenue loss. However, the Revenue appealed against this decision, leading to the Tribunal's reversal of the cancellation of the penalty.

During the High Court proceedings, the court examined the explanations provided by both the assessee and the Revenue. The court observed that the delay was technical in nature, with no loss of revenue and no grievances raised by contractors. Citing the Hindustan Steel Ltd. case, the court emphasized that penalties should not be imposed for technical or venial breaches without deliberate defiance of the law or contumacious conduct. Consequently, the court set aside the Tribunal's order and restored the Commissioner of Income-tax (Appeals) decision, concluding that it was not a fit case for the levy of penalty under section 272A(2)(g) of the Act.

In summary, the High Court's judgment focused on the issue of whether the delay in issuing tax deduction certificates warranted the imposition of a penalty under section 272A(2)(g) of the Income-tax Act, 1961. The court evaluated the explanations provided by the assessee and the Revenue, ultimately determining that the delay was technical in nature, with no loss of revenue or grievances from contractors. Relying on legal precedents, the court concluded that the penalty was not justified in this case and restored the decision of the Commissioner of Income-tax (Appeals) to cancel the penalty.